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Business travel: Stay with Mom and Dad Hotel

Hotel Tu Casa

The saying is “you can never go home…” or something like that. Well, have you ever thought about staying with mom and dad, or dad and dad, or mom and mom, or any other variation, as a hotel?

(I know I know eek!) but thing about this:

  • Its a tax deduction for you
  • Tax-free income for your parents

 Win -win for both.

Now this isn’t limited to just your parents, your siblings and even your best friend can fall into this category. 

This only works if you need to have a business reason, so no weekender just for the sake of a visit. However renting a room, at a fair rent while attending say, a convention, is fair game. You are creating a tax deductible expense for you and tax-free income for them. 

There are 3 rules you must abide by to make this work:

  1. 14 day limit on renting

    • This is the limit for the year. The income is tax-free, however they can not offset the income with expenses. 
    • This rule applies for to owned or rented properties

  2. More than 14-day personal use requirement

    • Now if you are renting a space, your ‘landlord’ needs to use this space for personal use for more than 14-days during the year. 
      • This is a non-starter if you are renting from their primary residents. 
    • This rule gets a little trickier for second homes or vacation homes as this rental counts toward personal use days. This falls under the murky waters of double or even triple taxation if the income is reported incorrectly. 

  3. Fair Market Rental Rates

    • Think of when you stay at a hotel you pay their fair market rate. The same goes for staying with family or friends. 

So we discussed, tax free income for your “Landlord” is an advantage for them that you should … well take advantage of. Now, let’s talk about why this is great for you.

Business Deductions for Lodging:

 If I have said it once I have said it a thousand times (oh my I sound like my mother, LOL!)  but the statement remains true…DOCUMENT, DOCUMENT, DOCUMENT

You need to keep records of your out-of-town stays whether at a hotel, third party rental, and your parents. 

  • You deduct as Ordinary and necessary business expense.
  • However, you can not deduct personal lodging expense. Our article on Business travel may help you to understand the difference.

For this to work, you need to issue a 1099-MISC to the parties you rented from if it is over $600.00. Now don’t freak out. I did say this was tax free income, and I meant it. The IRS as we all know LOVES paperwork, and they want to keep track of your businesses expenses as much as you do . 

Hotel Tu Casa (mom and dad’s place)

What this means for them is they will report this income on their tax return on specific tax forms for both the income and the reason why it is non taxable income.

Shameless plug: We know how to do that for you!

The Dreaded Occupancy Tax

Now even though the tax man will not collect on this income, there is another tax man that will. This is called occupancy tax, in reference to sales tax on hotels, etc. Since this is unavoidable, have your parents include it within the bill. This is further proof of your stay, for your business. Your parents will have to pay this tax, which is minimal in comparison to the Free income they will be getting. 

Still unsure about how to make this work? Contact us for more information